The joys and stupidity of buying modern coins

[cladking]

The bicentennial quarters and half rolls represented about an hour's pay at the time they were issued. Most people could afford to set them aside and millions did. Gems were and still are nearly nonexistent in these rolls. Gems can be found in mint sets from '75 and '76 at nearly the same rate as they could be found 25 years ago. (about 2%). What does this tell you about people's collecting activity? These sets were available for LESS THAN FACE VALUE for many years. How many people do you think were setting these aside?

 

Actually coins circulate far "more" today than they did back in the 1850's. They do have a much lower velocity or turnover but they don't get lost at the back of a warehouse or buried in the back yard because the Yankees are coming or the banks are faltering. Until quite recently they were not saved out of circulation for numismatic reasons either. While it takes much longer for a coin to wear now this wear will be nearly universal over the entire mintage. Remember in 1960 it was not unusual to see a 1932 quarter in AG! This coin was only 28 years old but many had worn out. It also wasn't to unusual to find an XF/AU 1932 quarter. These were hardly common but the actions of the fed, mint, and coin collectors did cause some old coins to be spared the ravages of circulation. The old clads are much older than this now but you'll rarely see one even worn down to Good. The big difference is in trying to find the high grade examples. Try finding a nice XF '68 quarter, or even a VF. You'll look through many bags before you find the XF. Heck with VF, try finding a nice well struck Fine. It'll keep you busy. While $10 was only a couple hours pay in 1968, how many people do you think set aside a roll of these. I've been looking 30 years and bet I haven't laid eyes on ten original rolls of these. Need I tell you how many gems were in these rolls? And this is one of the easier clads to find in rolls! Sure lots of people are setting aside rolls today, but these have no more effect on the populations of 1968 quarters than they do on the populations of 1868 quarters.

 

Even with the dramatically higher savings rates for the coins now there is still the possibility that demand will grow to outstrip these supplies. Look at the early states issues. People are getting a little complacent about the numbers of these being set aside, it may be time for another issue to be under saved.

[jtryka]

You raise some interesting points, but average hourly wages in 1976 were about $8.24 per hour (in 1982 dollars) so nominal wages would have been slightly lower, however that is not a big deal. As far as any mint set selling below face, I find that difficult to believe, since any sane person would just cut them up and spend them. If you have any empirical evidence of this, I would love to see it. Most of your points are reasonable, but it still does not address a key element of supply, that being all the coins that never made it into circulation. How many bags of coins are still sitting in vaults at the Fed or the Mint? No one knows for sure. Remember the 1903-O Morgan? How about all those rare CC Morgans that were found and sold to collectors? It seems far more likely to me that the government might "find" a large number of these coins that were never released a few years down the road. Heck, just look at the mint selling all those "found" proof sets from 1999-2001. Current prices on some of these issues are implying the best case scenario in which the market knows that no additional supply is forthcoming, or that at the very least all potential supplies are included in the supply/demand assumptions undergirding these prices. Perhaps the biggest problem I have with the whole thing is the remarkable difference in prices between raw coins and slabbed ones. If you can take a mint set, purchased for $14.95 and get a coin slabbed with a certain number on the holder, from a certain grading company and now the coin is worth hundreds or thousands of dollars, that is a problem and a big sign of a bubble. It's no different in my mind than all the companies that added ".com" to their names to enhance their share prices back in 1999.

[cladking]

There are no bags or rolls of 1968 or any other pre 1996 quarter sitting in any mint or fed warehouse. The mint adopted FIFO accounting in 1972 and began rotating their stocks of coin at that time. There have been no releases of coins older than 3 1/2 years since 1972. This applies not only to uncirculated coin but also to circulated coin. This is the primary reason that the coins are wearing more universally now. Only chance or a childs piggy bank can protect a coin for very long.

 

Take a look at the grey sheets from about 1983 to 1995. Many mint sets bid far back of face value for many years. Dealers sometimes inadvertantly RETAILED these sets at less than face value because they bought at 20% back of bid and sold at 10% over bid which could be under face. Yes, it is logical to assume that vast numbers of mint sets were destroyed and spent because they were "worth" less than face value. The 1980 mint set still bids less than 10% over face.

[DWLange]

I believe there may still be one exception remaining to the FIFO rule. I've seen very few 1997-98 quarters in circulation, and I suspect that these were stockpiled by the Federal Reserve as protection against a coin shortage, should the state quarters be widely hoarded by the public. Of course, there's been no shortage of quarters, due perhaps to an overall slowing of the economy. But I still see very few 97-98 quarters, and I believe these may have been forgotten in some vault.

[cladking]

It takes several years for the coins to be evenly dispersed throughout the country so it's often difficult to tell with certainty what's national and what's just a local phenomenon. The '96 quarters are also underrepresented in circulation and may exist in storage. It's possible that normal distribution was disrupted by the need to get states issues into circulation as quickly as possible.

[nwcs]

Very interesting points. I'll say that here in TN, I see 1996 quarters quite often. In fact, when I don't get a state quarter, I find it's a quarter dated 1992-1996 quite often. I don't see many 1997s and 1998s, though. So the local factor probably plays more of a role than we realize.

 

Neil

[Oldtrader3]

On the 3 piece Bi-Centennial Sets: 40% Business Strikes: 11MM minted/4.2MM distributed. 40% Proofs: 4MM minted/3.2MM distributed. Issue prices were $8.00 and $15.00 respectively. This being the case, there must be almost 7MM Business Strike 40% Silver coins in storage at some mint. I do not know if some of these were melted in 1979 wjen silver prices went crazy. Plus, I would guess that almost all of the issue on these sets were saved.

 

The mint has probably sold more of these sets then these dated figures indicate, but still there is a major Seignorage problem here with the Business Strikes particulary. Are these coins going to be dumped in the market sometime in the future? Who knows, but right now these sets sell for just a slight premium over issue price. In 1979 $ this is a big deflation. However, if silver raises the worth of and demand for these issues in the future, the Mint may sell them off to correct the Seignorage liability on their books.

[cladking]

The 7,000,000 missing coins were struck on regular high speed presses and are of atrocious quality. Some of these were sold later in a plastic sleeve without a white stripe unlike the better quality coins. They were sold up until about 1982 when they were removed from the market. It is likely these coins were melted. These poor quality coins are quite difficult to find but are usually discounted anyway. They never existed in rolls or bags. They were dumped into 55 gallon drums.

 

The mint had believed that the 11 million authorized mintage was the cap on production. At the last minute they came to believe they were required to strike the entire number. This necessitated the use of high speed presses and resulted in the poor quality coins.

[jtryka]

The mint sets selling under face was likely only for bulk transaction where a larger dealer wanted to clear inventory, and didn't have the resources to cut them up. Most smaller dealers would just cut them up and stock the register with them. I have no idea why any collector would sell the sets under face unless they were just dumb. At 20% under face, I would buy everyone I could, and pay folks minimum wage in a sweatshop to cut them up and put them in bags to the bank. Let's see, $0.91 per sheet (or $1.91 if they had a dollar), perhaps 100 sheets per worker per hour, so $91 to $191 per worker cut up, I have gross profit of 20% or $18.20 to $38.20 per hour, I pay them $3.35 an hour to do this in the garage, so I clear $14.85 to $34.85 per hour just for doing nothing. How long would this disparity remain before arbitrageurs like me would bid up the prices to breakeven on this business model?

 

As far as the FIFO on the mint goes, it's a nice plan, but remember this is government work. Say you run through a BILLION or two or three of each denomination in a year, how hard would it be to lose a barrel or two in the back? You certainly don't know what the mint and fed still have (though you may believe you do) especially since the mint probably doesn't know exactly what it has.

[rgv]

This is off topic, but the population of 5.3 million in 1800 really sparked my interest. From 1793-1800 the mint produced around 11 million coins almost 75% of those being 1 cent pieces. That means there was a total of about 2 U.S. coins per person in 1800. The face value for all coins made between 1793-1800 was under $7,000,000. The 1798 Half Eagles alone were $4,000,000 of that total. I know the economy was different in those days, but the fact that any of the smaller denomination coins survived above good condition is amazing.

[GDJMSP]

It's actually not that hard to determine what the Mint has in the way of inventory. All you need to do is read the quarterly reports to Congress - inventory is listed.

 

As for the Fed - that is another matter and not so easy. You would have to go through each of the 12 member banks annual & quarterly reports to even come close to determining what they have in the way of individual denominations. But the information is available for someone enterprising enough to attempt to collate it.

 

Even after performing such a monumentous task - there is still room for error. But I doubt it would be significant enough to matter. These are bankers after all - and bankers are just a tad particular when it comes to accounting.

[cladking]

The fed keeps surprisingly small stocks of most coins. They rely a lot on the mint's ability to get them coins quickly. Usually demand changes on a highly predictable annual basis and large stocks are simply not needed. There is some evidence that all the fed branches do not adhere strictly

to the FIFO reporting requirements, but turnover is so great that it's difficult for coin to "get lost" at the fed for a protracted lenght of time.

 

While it can't be ruled out that a quantity of any date is sitting in storage somewhere it would be extremely unlikely. If more than several million were involved then it would show up in populations of circulating coinage. Similar numbers of each date being set aside in vast numbers would require intention. In many years of watching circulating coinage I've never seen old circulated or uncirculated coin come into circulation (Since FIFO accounting took effect). Before 1999 the only coins "missing" from circulation were the P and D bicentennial issues. These have obviously been hindered by the public who tend to accumulate a quantity of them and then spend them. Most of these circulate at about one quarter the velocity of other quarters and have about a quarter as much wear.

 

 

 

 

[cladking]

There was extremely limited interest in these sets. People were not even interested enough to count up the value in the set to see if they were buying it or selling it at less than face value. Those who did notice were likely to destroy any sets they owned. The sets were never readily available for the type of enterprise you suggest. It wasn't huge numbers of sets suppressing their "value" to less than face it was that the supply totally swamped the anemic demand. Obtaining the number of sets necessary to keep even one minimum wage earner busy would have been a strategic and logistical nightmare.

[jtryka]

As far as the FIFO goes, it not only hinges on the Fed branches, but also the large commercial banks as well. Most could care less what date and mm are involved, they just pull out bags when they need them. As far as inventory listings in the mint reports to congress, I don't think they break the inventory down by date and mm. Personally I think there are lots of neat things in the basement, and it wouldn't surprise me a bit if we "found" a bag of 33 Saints someday. The procedures may be designed to prevent bags from sitting in the vault, but the mint also has procedures to prevent employees from making Sacagawea mules and selling them to error collectors, and that didn't stop some enterprising folks. In short, I would be very careful basing my own purchasing decisions on my understanding of mint policies and procedures. History is littered far too much by the scarce coins that were later released in hoards from the mint. And remember also the piles of cash that were placed in strategic reserve for y2k, how much of that is still in storage?

[swhuck]

History is littered far too much by the scarce coins that were later released in hoards from the mint.

 

You mean that 1903-O dollar I bought 40 years ago hasn't gone up in value???

[cladking]

It's vaguely possible that there might be a bag or more of old coins sitting in a vault somewhere long lost and forgotten. Perhaps even a rare coin. But certainly not in a coin handling area at the mint or the fed. All the coins in these areas are circs and uncs which have been in storage for less than three years. There were many reasons that the government and private enterprise and individuals set aside the classics and they would turn up generations later. All these reasons hinged on the fact that the coins had intrinsic value. For what possible reason would the government set aside a bag of nickels or quarters? The only possible way would be for them to get lost and this would be a slim possibility indeed since the coins have been rotated since 1972. There are no mountains of coins sitting in warehouses all over the country. An individual fed bank normally keeps less than a few million dollars in quarters. The total number of quarters in storage is normally around one billion coins. These typically will be mostly brand new coin less than three years old and represents only about 3% of the number in circulation.